There is an issue that has to be resolved other than the NFL referee strike.

September 26, 2012 at 7:31 am Leave a comment

In the rush of regulations being churned out by the CFPB one proposal that hasn’t gotten the attention it should deals with the authority that NCUA should be allowed to exercise over state-chartered credit unions.  If you’re a federally chartered credit union please keep reading:  you have a stake in preventing NCUA’s aggressive overreaching in the name of protecting the Share Insurance Fund.

You have until October 1, 2012 to comment on a proposed NCUA regulation which would allow the agency to make an independent assessment as to whether a federally-insured ,state-chartered credit union is  a troubled credit union under 12 CFR 701.14.  I’ve been highly complementary of NCUA’s recent mandate relief proposals.  But I am troubled by NCUA’s increasingly brazen disregard of state-level prerogatives in its obsession with protecting the Share Insurance Fund.  This regulation is the best example yet.

For more than 20 years, NCUA’s own regulations have stipulated that the agency will defer to state examiner CAMEL and CRIS ratings when determining whether or not a state-chartered natural person or corporate credit union should be considered a troubled credit union.  This is a designation you want to avoid.  If you are designated as a troubled credit union it means you have a CAMEL rating of 4 or 5 and NCUA can block any of your director appointments or executive hires.  NCUA is concerned that a 2%-4% variation among ratings by the federal and state regulators exists, meaning more state-chartered credit unions would be subject to this oversight but for the fact that NCUA must rely on state CAMEL ratings as opposed to its own.

For those of us who believe that the dual charter system is important for both federal and state credit unions, it’s time to tell  NCUA to stop categorically putting its concern for the Fund, no matter how far-fetched, above a state’s right to be the primary regulator of its financial institutions.  There are New York State credit unions that are subjected to both state and federal examinations.  Not only is this a waste of resources on the part of NCUA, but stories like these make a credit union think twice before considering the state-charter.

In this and other proposals NCUA is arguing that state-level examiners aren’t competent enough to be trusted.  Of course, NCUA doesn’t say that but why else does it suddenly feel compelled to stop relying on state examiner findings and take a closer look at rule-following credit unions that happen be state-chartered?

A lot of lessons can be drawn from the financial meltdown, but unless NCUA explains how things would’ve been better if only it was completely in charge, then it’s time for state regulators – maybe even New York’s Department of Financial Services – to point out that state examiners have an important role to play and within their jurisdictions are equal partners with their federal counterparts.

 

 

 

 

 

 

Entry filed under: Advocacy, Compliance, Regulatory. Tags: , , , , , , .

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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